Study on Blue Growth and Maritime Policy within the EU North Sea Region and the English Channel

Study on Blue Growth and Maritime Policy within the EU North Sea Region and the English Channel Final Report FWC MARE/2012/06 SC E1/2012/01 Client: DG Maritime Affairs and Fisheries Rotterdam/Brussels, 4 th March 2014

Study on Blue Growth and Maritime Policy within the EU North Sea Region and the English Channel Final Report FWC MARE/2012/06 SC E1/2012/01 Client: DG Maritime Affairs and Fisheries Rotterdam/Brussels, 4 th March 2014

About Ecorys and Consortium Partners Consortium Lead Partner ECORYS Nederland BV P.O. Box 4175 3006 AD Rotterdam The Netherlands T +31 (0)10 453 88 00 F +31 (0)10 453 07 68 E fwcbluegrowth@ecorys.com Registration no. 24316726 www.ecorys.com BR26513

Table of contents Executive summary 1 1 Background and overview 9 1.1 Background 9 1.2 Main study components 10 1.3 Structure of this report 12 2 Country Analysis 13 2.1 Overview 13 2.2 Belgium 13 2.3 Germany 15 2.4 Netherlands 17 2.5 Norway 19 3 State of play: most relevant and promising sectors in the sea-basin 23 3.1 Overview 23 3.2 Offshore wind 23 3.3 Offshore oil and gas 24 3.4 Aquaculture 26 3.5 Deep-sea shipping 27 3.6 Shipbuilding 29 3.7 Cruise tourism 31 3.8 Coastal protection 32 4 Future scenarios for the most relevant and promising sectors in the sea-basin 35 4.1 Offshore wind 35 4.2 Offshore oil and gas 38 4.3 Aquaculture 41 4.4 Deep-sea shipping 44 4.5 Shipbuilding 47 4.6 Cruise tourism 49 4.7 Coastal protection 51 5 Conclusions and recommendations 55 5.1 Conclusions 55 5.2 Recommendations 58 Annexes 59 Annex I. Methodology for data gathering and processing for the North Sea and Atlantic Arc Annex II A/D. 2-page country summaries Annex III A/G. Sector reviews

List of Abbreviations Bn BRIC CBS CS CSR DG MARE DKK DSS EC EEDI EIB ERDF ESF EU EWEA FAO GVA ICT IEA IMO JRC LNG MARPOL Mln MS MW NREAP NUTS OECD OEM OPEC billion Brazil, Russia, India and China Centraal Bureau voor de Statistiek (Netherlands) Continental shelf Corporate social responsibility Directorate-General for Maritime Affairs and Fisheries Danish krone Deep-sea shipping European Commission Energy Efficiency Design Index European Investment Bank European Regional Development Fund European Social Fund European Union European Wind Energy Association Food and Agriculture Organization Gross Value Added Information and communications technology International Energy Agency International Maritime Organisation Joint Research Centre Liquefied natural gas International Convention for the Prevention of Pollution from Ships million Member States Megawatt National Renewable Action Plan Nomenclature of Territorial Units for Statistics Organisation for Economic Co-operation and Development Original Equipment Manufacturers Organization of the Petroleum Exporting Countries

OTEC RAS RDI SECA SME TEN-T UK US Ocean thermal energy conversion Recirculating aquaculture systems Research, development and innovation Sulphur Emission Control Areas Small and medium sized enterprises Trans-European Transport Networks United Kingdom United States List of Tables Table 2.1: Overview of the key maritime economic activities in Belgium 14 Table 2.2: Overview of the key maritime economic activities in Germany 15 Table 2.3: Overview of the key maritime economic activities in the Netherlands 18 Table 2.4: Overview of the key maritime economic activities in the Norway 20 Table 3.1: Overview of the economic contribution of the Deep-sea Shipping industry 28 Table 4.4.1: Global market potential related to greening trends 47 List of Figures Figure 3.1: Cargo handled in North Sea ports by service type and country (2011) 28 Figure 4.1 Offshore wind ambitions in North Sea countries (except Norway) until 2020 according to NREAPs 35

Executive summary Background and Aim This study on the Blue Growth potential in the North Sea and the English Channel is one of four sea-basin studies commissioned by DG MARE with the aim to examine in closer detail the individual development patterns of the maritime industries within the European Union. Within the framework of this present study we have evaluated the state of play and growth potential of four countries: Belgium, Germany, the Netherlands and Norway. Furthermore when zooming in on the development of particular sectors, data on the North Sea-related activities in Sweden, Denmark, the UK and France were also taken into account. Importance of Blue Growth in the North Sea The region of the North Sea is highly industrialised, with major port areas along the shores and increased offshore activities taking place. Some of the industries have been undergoing significant changes with both increased production (e.g. offshore wind) and stagnating or decreasing production (e.g. oil and gas). In addition to primary production, the region also serves as a home to many up- and downstream activities for its main sectors as well as hosting strong educational and research capacities. Taken together, the North Sea coast is a crucial region for Europe s Blue Economy: its maritime economy is estimated to represent a GVA of at least 150 billion (out of just under 500 bn. for the EU as a whole 1 ), and employs at least 850 000 people (out of 5.4 mln. people for the EU as a whole). These estimates include Belgium, Germany, Netherlands, and Norway as a whole; the UK, France, Denmark and Sweden are included in part. Although not a Member State, Norway has a very important maritime economy, if only because 92 % of its population lives in maritime areas. The maritime economy of Norway constitutes an enormous GVA, estimated at 80 bn; and employing about 150 000 in almost 14 000 enterprises. The bulk of the GVA (and less so employment) is generated by the offshore oil and gas sector, centred around Stavanger, which had a value creation of 63 bn. in 2010. Closely connected to offshore is the shipbuilding sector. In recent years, shipyards in Norway have specialized in building and especially designing offshore supply vessels and other oil and gas related ships. Fishing and aquaculture are important activities as well, especially in terms of employment (together almost 28 000 jobs), predominantly within small enterprises. Aquaculture focuses predominantly on salmon production and has a strong research potential. Norwegian industrial and maritime policies have a clear focus on growth and development. This has undoubtedly contributed to both increased value creation and global knowledge leadership in key sectors such as the oil and gas and the supply industry, which consists of both shipbuilding and deep sea shipping, amongst others. Improving access to finance for high risk and high potential projects, cluster support and university-enterprise cooperation are mainstays of Norwegian policy for strengthening growth. 1 European Commission (2013): Blue Growth- Maritime Affairs, http://ec.europa.eu/maritimeaffairs/policy/blue_growth/ 1

The North Sea coast of Belgium counts at least an approximate 37 000 maritime jobs, contributing to a GVA of 4 billion per year. Both deep-sea and short-sea shipping are crucial, but so are coastal tourism and the construction of water projects (e.g. port breakwaters, coastal protection structures, dredging of access channels). While many of these activities have been long established in the country, construction of water projects and inland waterway transport demonstrate strong development potential still. Offshore wind, centred around Oostende, has been identified as the most promising activity. Short-sea shipping (Antwerp) has growth potential as well, while Zeebrugge is still growing in the area of deep-sea shipping as well as cruise shipping mostly due to the proximity of Brugge as a major tourism attraction. The North Sea-coast of Germany employs at least an estimated 170 000 people, 4 000 enterprises and a GVA of 14 bn. This part of the coast features above all shipping and fishing. While deepsea shipping has been negatively impacted by the economic and financial crisis, a slow recovery process has now been underway. Offshore wind is one of the most rapidly developing sectors in Germany as the extension of offshore wind energy is a main focus of the Federal Government since the country s decision to phase out nuclear power and step up climate protection targets. In March 2013, a total of 320 Megawatt (MW) were in operation (of which 50 MW in the Baltic Sea), another 1 600 MW under construction and 10 000 MW approved, most in the North Sea. The long established shipping industries are resilient and strong in terms of innovativeness, sustainability and development potential. Most activities are centred around four clusters which are rather diversified in nature: Ems-Axis, Metropolitan Region Bremen-Oldenburg, Metropolitan Region Hamburg, and Schleswig-Holstein. The Netherlands has a diversified maritime economy, worth at least 13 bn., and employing about 140 000 across 9 000 enterprises. Deep-sea and short-sea shipping are important and centred around the Rotterdam and Amsterdam ports, as well as some other harbours. Off-shore oil & gas is the second largest maritime industry, however growth prospects are bleak. Attention is shifting towards construction of water projects, which has grown steadily over the past years. Key industry players are presenting solid average annual growth year by year also through mergers and acquisitions (e.g. of Smit-Tak by Boskalis). Innovation is one of the main drivers of growth in the sector and research institutes such as TU Delft and Deltares help to strengthen the competitive position of the maritime economy in the Netherlands and its export potential. Shipbuilding remains important in the north of the country. Inland waterways and yachting count a large number of small enterprises. In addition to the above, the North Sea economy includes four countries in part. Of the United Kingdom s total marine employment of about 550 000, more than 330 000 can be attributed to activities in the North Sea region, while more than 43 billion is generated in the North Sea. For Denmark and Sweden, no sea-basin split is available. In the case of France one region, Nord-Pas- De-Calais has access to the North Sea and as such generates approximately 2 billion GVA from maritime economic activities, particularly inland waterway transport and passenger ferry services. In the case of Denmark, qualitative assessment indicates substantial shares related to the North Sea, with the region of Mid Jutland alone account for some 2.2 bn. GVA and more than 12 000 jobs. In both the UK and Denmark, the oil & gas sector is the largest contributor to GVA while coastal tourism and short-sea shipping contribute most to employment. In Sweden, the Västsverige region around Gothenburg has the highest concentration of maritime activities and accounts for about 860 mln GVA and some 12 000 jobs mainly in shipyards, ship repair and inland waterway transport. 2

State of play and development potential in key sectors Following on from the findings of the country analysis, a number of key sectors with relevance and strong future development potential have been studied at the level of the North Sea as a whole, namely: offshore wind, offshore oil & gas, aquaculture, deep-sea shipping, shipbuilding, cruise tourism, and coastal protection. In a short period, the North Sea has become the most important concentration of offshore wind turbines in the world. About 5 000 MW of capacity have been installed so far in the EU and North Sea countries play thereby a very strong role in the development of this technology. The UK alone as leading country concerning offshore wind has installed 2 900 MW so far and therefore obtains almost 60% of EUs offshore wind capacity. Moreover, the North Sea region also proves to remain the driving region for future growth of the sector in the EU. In 2012, 80% of the EU offshore capacity was installed in the North Sea. 2 In 2013 the installation capacity increased even more with a total of 277 wind turbines grid connections in the first half of the year, totalling 1 045 MW in seven wind farms. A further 130 turbines, totalling 484 MW, are installed but awaiting grid connection. The strong growth rates in installation in recent years led to about 30 000 jobs and 2 bn GVA in 2012 directly linked to offshore wind. Given the data for the first half of 2013, a doubling of employment and GVA can be expected in comparison to 2012. As offshore wind is still in a development stage, most jobs (> 90%) are linked to manufacturing and installation. Over time there will be a shift towards more jobs also in maintenance of installed wind farms. As a growing technology, offshore wind can contribute substantially to achieve Blue Growth in the upcoming years. Based on the National Renewable Energy Action Plans (NREAPs), especially the UK and Germany plan to expand offshore wind energy capacity, making it a major component of their national energy mixes. Decisive factors which can shape the future of the sector, either positively or negatively, are electricity prices, technological development, and access to finance. Offshore wind offers significant opportunities for synergies with processes such as maritime spatial planning as well as with other energy sources e.g. wave, tidal, OTEC, osmotic sources (with wave and tidal being the more mature ones). Uncertainties in the sector on the one hand arise from a strong dependency on public financial support, which is open to political debates and hence is under constant review. Within the context of the public budget crisis, governments are increasingly reviewing their public support schemes and the tendency is to cap such public support. Even more important, the EU policy framework is currently only in place until 2020 and the uncertainty about the period afterwards already discourages new plans and initiatives right now. Another portion of uncertainty is linked to the future potential of other resources such as shale gas. 2 EWEA (2013): The European offshore wind industry - key trends and statistics 2012, p.6 3

Offshore oil & gas in the North Sea region has been an important source of employment and revenue as well as an essential energy source with low or no geopolitical risk as opposed to specific third country imports that could be threatened by political instability of the state of origin or country of transit. Within the North Sea region the main oil and gas producing countries are Norway, the United Kingdom (with Scotland producing the largest quantity), the Netherlands and Denmark. Detailed figures on production size appear unreliable as data sources refer to confidentiality. According to figures from national as well as Eurostat sources, the oil & gas sector has a direct employment of around 70 000 people in the North Sea including the UK, Netherlands, Denmark and Norway. Indirect and induced employment is however estimated to be over 600 000. Although figures for GVA are not widely available in the sector, Norway had a reported 63 billion revenue from offshore oil activities with the UK reporting 36 billion for 2010. Reports are indicating that offshore oil & gas activities have reached their peak sometime during the mid-1990s and the industry is now in a steady decline. This however does not mean a sudden drop of employment or production and offshore oil & gas activities continue to dominate the North Sea regions of the aforementioned countries. Furthermore, there are still potential reserves to explore especially so in Norway. Due to many decades of experience in offshore oil & gas exploration, extraction as well as research and development, the North Sea is an important hub of knowledge and expertise which could potentially play an important role in transferring this knowledge to other parts of the world or onto other sectors within the region of the North Sea. Synergies exist with offshore wind and sea-bed and aggregates mining in terms of activities such as building and installing offshore structures, laying cables on the seabed or carrying out maintenance and safety checks. Furthermore, activities involving the supply chain actors are also transferable such as the case with underwater vehicles, robotic technology or smart buoys. The main drivers for the industry are research and innovation including collaborations (training, maintenance etc.). Policies that are of influence to the sector are various, and they can also relate to biofuels, environmental impact assessments, taxation etc. Compared to other coastal areas, the North Sea basin is not a primary focus for marine aquaculture due to climate (particularly water temperature), lack of sheltered sites (coastal topography) and historical levels of pollutants in the basin. However, as environmental conditions are now improving reduction of pollution - and so is the overall potential of the North Sea for expanding the aquaculture sector. Future development potential is also strongly linked to the ability of the sector for lowering its environmental footprint. The regulation of pollution and control of production by EU legislation has gone considerable lengths to mitigate such impacts and give assurance to the market on quality and sustainability. Atlantic salmon aquaculture in Norway is by far the most important activity, and likely to continue to increase in the future, by an expected 4% a year. In the Netherlands, aquaculture development is constrained by environmentally driven legislation and opposition on environmental grounds. In the United Kingdom, the primary opportunity for expansion of aquaculture lies with RAS (recirculating aquaculture systems) production of species such as barramundi (Pacific seabass), tilapia, African catfish etc. However, the high costs of energy, land, water, labour and equipment coupled with competition from low-cost imports mean that significant future development is unlikely. The sector currently has a strong need to increase synergies and reduce tensions particularly in relation to environmental and health concerns. Potential for future growth can come from certification (most European salmon producers have signed up to certification to ASC standards within 7 years) and genetic modification which could lead to increases in production. R&D is seen as the most important driver for growth. Uncertainties come from the impacts of global climate 4

change as aquaculture is particularly sensitive to water temperature changes. Additionally synergies with other maritime sectors (multifunctional platforms) and improvements on water quality resulting from environmentally friendly practices could potentially increase the sector`s future potential. Deep-sea shipping is a highly significant maritime activity for the countries bordering the North Sea basin. An important contributor to the sector`s performance is the Le Havre Hamburg port range, which includes some of the biggest ports in Europe and the world. The ports of the North Range, located in a range of about 500 km along the south coast of the North Sea and the English Channel, serve the hinterland of Germany, the Netherlands, Belgium, France and that of other European countries, eventually comprising a market of more than 350 mln people. More than 50% of the cargo volumes handled there have an extra-eu origin while the ports of the area serve as transhipment hubs between deep-sea and short-sea services. 3 The majority of deep-sea trade in the region goes through the Netherlands which accounts for as much as 41% of the total deep-sea cargo volumes of the sea-basin. Belgium, Germany and the United Kingdom follow with about 15-20% each. In 2011, the ports of the countries bordering the North Sea basin handled a total of more than 648 mln. deep-sea tons. It should be noted that despite the sudden slump of international trade volumes following the 2008 crisis outbreak, deepsea shipping has managed to bounce back to pre-crisis levels achieving even a 25% increase in freight volumes handled since 2002. Direct employment levels are at an estimated 60 000 jobs while a direct GVA of some 11 bn. is achieved. From country-specific data we know this figure can be much higher if indirect and induced employment is taken into account. The sector has considerable potential for synergies with the rapidly growing LNG sector where LNG can be used as an alternative fuel for DSS assisting to achieve compliance with the increasingly strict environmental regulations. An analysis of trends and prognosis suggests that deep-sea shipping in the North Sea will be faced with slowly but steadily increasing cargo flows as a result of increasing trade volumes and vessel sizes. Vessels are also calling at fewer ports, thus putting extra strain on specific port-to-hinterland bottlenecks due to increased requirements in peak capacity. This latter aspect will require ports to develop more efficient operations, assisted by the increasing use of ICT systems and specialised infrastructure. A probable scenario is that the deep-sea shipping trade will be concentrated at fewer ports in Europe. The likelihood of this scenario is reinforced by the potential impact of the Panama Canal expansion on global shipping routes. In the long run this will also affect cooperation models between deep-sea ports as well as between deep-sea and short-sea ports in the sea basin serving regional distribution. At the same time an increased inter-port integration will allow further optimisation of capacity use during peak periods, reducing the pressure on port infrastructures. Shipbuilding is a long established sector in the region and consists of two major economic activities: the construction and maintenance of ships at yards and the supply of marine equipment which, especially in the North Sea region, are well integrated and working together in clusters. While in the North Sea as well as elsewhere in Europe, yards are facing weak demand caused by global overcapacity and fierce competition from Asian competitor yards, the competitive position of players here is considered best of Europe with renowned suppliers of high value niche segments, e.g. cruise vessels, dredgers and offshore vessels. Supplier and manufacturing clusters around leading yards such as Meyer Werft in Germany, IHC and Damen in the Netherlands or STX in 3 Maatsch and Tasto, Hamburg-Le Havre Range topped 40 million TEU in 2011, ISL (2012) 5

Norway are but a few examples of these. When only looking at narrow sector data from e.g. yards, figures already amount to more than 5 bn. GVA and over 64 000 jobs. Such figures are likely doubled if marine equipment activities are added. The increased focus on fuel efficiency, reduced operating costs and green performance of ships together with a strong demand for energy efficient engines or alternative powering systems is a very positive indication for the future. In addition, suppliers in the North Sea region are well equipped to provide the equipment needed to stricter upcoming environmental rules. However, the uncertainty regarding this introduction is problematic for, especially, the smaller suppliers. After all, their current market size is limited and ship owners are not willing to invest in their expensive equipment before new rules are clearly in place. Possible synergies can be found with the offshore (oil & gas but also wind) industry. The growing demand for cruise tourism provides room for synergies as well. The greening trend is a cross-cutting synergy that shipyards and suppliers provide to all marine sectors The cruise sector is an important player in the region and its overall GVA in the North Sea region is estimated to be in the range of 800-1 000 million while the number of jobs is estimated at around 10 000. A key trend is the increase in numbers of source passengers from the region, as the cruise industry is expanding into different target groups. Another trend is that towards an increasing number of destination passengers in the region (resulting from more near home embarkations, more short trips and shorter distances between ports).the cruise market is increasingly segmented into various market segments (large scale versus small scale, affordable versus luxurious, highlights versus discovery, etc.). This offers further opportunities for cruise sector development in the North Sea. The structure of the cruise industry is rather concentrated. There are several cruise brands but these belong to just a handful of companies, mostly American. Product innovation and cooperation between ports, stakeholders and cruise companies will be key in further developing the cruise market, aiming at joint marketing of the region and its attractions, developing a cruise terminal infrastructure network and developing a variety of shore excursion offerings. The sale of shore excursions is essential to cruise companies. More cooperation between ports and stakeholders from the local tourism sector will help selling the North Sea Region cruise ports as cruise destinations. Sustainability and innovation provides one of the areas for synergies as the sector is seeking to benefit from the availability of a well-developed green technology manufacturing base. Coastal protection is of particular importance for the region as parts of its coastal areas are highly susceptible to coastal erosion. This is especially the case for the southern part of the sea-basin - also the areas with the highest densities of population industry activity and other concentration of assets - resulting in potentially high negative impacts. Past events such as the 1953 storm have triggered the region to develop response mechanisms. The lower western parts of the Netherlands and Belgium have by now a long tradition of fighting the seas, resulting in a well-developed sector of high standing that is exporting its technologies and services to other parts of the world as well. While the economic value of the sector in the region itself may be considered small (an estimated 1.5 bn. GVA and some 11 000 jobs), the sector has a much wider relevance both within the sea basin through spill-overs and synergies with other sectors, and as a basis for export opportunities worldwide. Coastal protection is a growing sector globally. Several countries in the sea-basin are relatively well advanced. They have a long history of coastal protection activities, providing high skills level and top players in executing works, both within Europe and as an export product. The region can promote this as a selling point and increase its global competitive position which could 6

result in growth. A second growth potential already materialised is the use of technologies for a multitude of other marine sectors (port construction, access channel dredging, support to constructing offshore wind platforms, etc.). Furthermore coastal works appear to be more and more designed for multi-use (e.g. port breakwaters also contributing to coastal protection, suppletion benefiting coastal tourism, coastal barriers acting as energy plants, and protection technologies serving marine species development). The sector has strong synergies with offshore activities such as wind energy, oil & gas and sand mining as well as urban and regional development. Conclusions: the North Sea as a knowledge hub The development and adaptation of innovative, sustainable cross-sectoral approaches, procedures and infrastructures are found to be one of the main drivers of development in the region. Sustainability remains an essential element for emerging as well as for more traditional industries such as shipping and port activities which are increasingly focused on the development and adaptation of green technologies. Consequently there is notable employment potential in the development, adaptation and maintenance of cross-cutting sustainable infrastructures as well as procedures. The region of the North Sea has for many decades if not centuries - hosted maritime industries and developed clusters as well as hubs of knowledge and expertise. While there are on-going collaborations between varieties of stakeholder groups, it is essential that the research and education potential and infrastructure that exist in the region is supported in the future through public and private financing. This wealth of knowledge and expertise provides opportunity for start-ups as well as for - established industries such as shipping or oil and gas which also require constant innovation in order to maintain competitiveness on the global market. Therefore long-term policy initiatives supporting research, innovation and the regional and local collaboration between start-ups, SMEs and multinational companies are an important contributing factor of future development. Much scope for cross-sectoral initiatives The study has found that long-established traditional sectors such as shipping, shipbuilding or oil & gas have arrived to a state where they efficiently distribute resources, effectively communicate with policy makers and stakeholders involved. They also make good use of and invest in research and innovation. This efficient coordination within (and sometimes also between) sectors is a result of the wealth of knowledge generated over decades on the potential resources, market demands, environmental and social impacts etc. For the majority of the maritime sectors the North Sea region is considered to be an active hub of knowledge, where innovation potential remains strong. However, there is further scope for improvement especially taking into consideration the changing landscape which is bringing forth the importance of renewable energy generation as well as the research and innovation potential that can link together various industries. One opportunity could be the use of multifunctional systems which can further intensify relations between offshore industries such as oil & gas, wind and aquaculture. Multifunctional platforms allow for the various use of the physical infrastructure while multifunctional support vessels can aid the construction, maintenance of off- and onshore installations including port facilities as well as carry out emergency response activities linked to coastal protection or offshore oil & gas. Further development into cross-sectoral projects can give a boost to employment as well as strengthen policy harmonisation and enhance knowledge and understanding of new applications. 7

Moreover, cross-sectoral initiatives coupled with research and innovation focus can further improve the competitiveness of the North Sea based maritime sectors specifically in relation to shipbuilding, coastal protection or energy. Cross-border initiatives can be strengthened One of the most important areas where cross-border cooperation could improve the long term strategic advantage of the region is that of education and training. One example comes from the oil & gas industry where there is a lack of skilled workforce even though there are initiatives for a better management of human resources. Therefore, it could be beneficial to have complete overview of skills needs - some of which could be transferred and utilised across borders. Aquaculture is another sector where collaborations between private enterprises are sporadic with the exception of the salmon industry which is the most developed sub-sector in the North Sea region. Hence a comparison can be drawn between the levels of development and that of crossborder or international collaboration. The above highlighted initiatives indicate that potential for employment and sector development remain in the utilisation of cross-sectoral initiatives as well as sustainable and innovative practices. Recommendations The overarching review of activities concluded both on a country as well as on a sectoral level across the sea-basin confirms the crucial importance of availability and accessibility of: Information and information exchange platforms facilitating collaborations amongst and between industry stakeholders, local and regional authorities reaching beyond the North Sea boundaries; Continuous investments and development of the research and innovation potential as well as infrastructure; Strong focus should be maintained in sustainability of off- and on-shore facilities as well as operational activities; Increased support and focus on cross-sectoral initiatives such as supergrid, multi-purpose islands, energy atolls, etc.;support to SME spin-offs and start-up companies; Support to marine spatial planning initiatives as a tool to facilitate cross-sectoral and crossborder dialogues in order to adapt to the changing regional maritime landscape. 8

1 Background and overview 1.1 Background This study on the Blue Growth potential in the North Sea and the English Channel is one of 4 seabasin studies commissioned by DG MARE with the aim to examine in closer detail the individual development patterns of the maritime industries within the European Union. The sea-basin studies have been carried out with a focus on countries with direct access to the North, Atlantic, Mediterranean and Black, and Baltic Seas. In order to obtain comparability between results of the sea-basins, methodologies applied in this study have been aligned with those followed for the other sea basin studies. Within the framework of this present study we have evaluated the state of play and growth potential of four countries, these are: A. Belgium; B. Germany; C. Netherlands; and D. Norway. Furthermore when zooming in on the development of particular sectors at sea basin level, data on the North Sea related activities in Sweden, Denmark, the UK and France, which are addressed under the parallel studies for the Baltic Sea and the Atlantic Arc, were also taken into account. This study has focused on the North Sea region and aimed at providing a comprehensive overview and analysis of the main marine and maritime economic activities. Additionally, it identifies the value and impact of these activities on the countries pertaining to the North Sea-basin. The study is also intended to serve as a background to the negotiations with Member States on the partnership agreements for the 2014-2020 programming periods. Based on these aims, the research process has been following a two-folded approach which includes the analysis of the countries along the North Sea coast and the assessment of a selected set of most promising maritime economic activities on the sea-basin level. This approach allowed to cross-validate results generated through the official statistics on the countries with that of additional data arising through various other sources including interviews in the sector reviews. This draft final report presents the comprehensive findings of the study including country reports for Belgium, the Netherlands, Germany and Norway and, in relation to the specific sectors studied in further detail, additional North Sea related findings for France, the UK 4, Sweden and Denmark 5. As most maritime economic activities reach beyond their core activities such as drilling in the case of off-shore oil & gas production and involve many up- and down-stream activities, patterns of cross-border collaboration have been mapped and drivers and barriers highlighted. 4 Complete report to be found in the Atlantic study 5 Complete report to be found in the Baltic study 9

1.2 Main study components 1.2.1 Data gathering method for maritime activities at country level Four different studies for four sea basins (Baltic, North Sea, Atlantic and Mediterranean + Black Sea) were commissioned by DG MARE. Two of these have been led by Cogea (Baltic and Mediterranean) and two other studies have been led by Ecorys. The two consortia developed a data methodology to align methods used, data sources and processing, as to ensure consistency and coherence. Key elements of the methodology are: a) The approach of marine economic activities in terms of value chains, which go beyond the narrow definition of economic sectors. As an example, the maritime economic activity of deep sea shipping includes the shipping sector, but more than 75% of employment is generated in supporting sectors found in ports and other places (think of cargo handling, pilotage, warehousing, distribution, etc.). Therefore, for each maritime economic activity, as defined in the Blue Growth study, a value chain was elaborated. b) To allow for replication preference was shown for publicly available sources like Eurostat since these are consistent across countries and sectors and allow the build-up of time series. As a consequence, economic sectors defined by Eurostat (NACE code system) were linked to the value chains defined. Not for all maritime economic activities NACE sectors are directly available, and especially for small sized or pre-mature activities like Blue biotechnology, ocean energy or maritime security, no statistical data are available through such sources, and the researchers had to rely on alternative data. For other activities, parts of the value chain may consist of sectors that are only partially relevant to maritime activities. c) Once data was gathered, allocation mechanisms were developed to split between maritime and non-maritime, for those sectors where applicable (example cargo handling includes handling of road and air cargo0, and to split between maritime sectors for those sectors relevant for multiple maritime activities (example cargo handling relates to deep sea but also short sea shipping). d) Finally, for countries bordering multiple sea basins, a split was needed and for each maritime economic activity, a mechanism to allocate the economic importance was developed. In Annex I, a detailed elaboration of the methodology can be found. 1.2.2 Country reports For each of the four countries allocated to the North Sea, a detailed analysis was carried out using a structured template (aligned with the other sea basin studies to ensure a harmonised approach for the collection of information). The resulting country reports present a quantitative and qualitative review on the maritime economic activities, both in terms of GVA and employment figures for the country as well as for NUTS2 level regions. Moreover, they provide and overview of the 7 largest, 7 fastest growing and 7 most promising maritime economic activities as well as an analysis of maritime strategies and policies. 10

As mentioned previously some of the countries under analysis have access to more than one sea basin in which case the consortia carrying out the evaluation has to provide a split within the country report identifying the economic value for the maritime sectors in the seprate sea-basins. For the Northsea study, this concerns Germany Therefore, an allocation between sea basins was made using the methodology developed for al sea basin studies (see Annex I). The overall methodology of the country reports and some aspects of the sector review have strongly built on the 2012 Blue Growth report 6. 1.2.3 Sector review The second main study output concerns an in-depth look at a selection of six maritime economic activities in the Nort Sea Region, which are considered highly relevant and promising, or otherwise unique for this sea basin. The aim of the sector studies was to map their future development potential for the North Sea region and to draw a comprehensive picture regarding their state of play. Based on the country reports, joinly with the European Commission the following six sectors were identified: deep-sea shipping/shipbuilding 7, cruise tourism, offshore wind, offshore oil and gas, marine aquaculture and coastal protection. The sector studies have been developed using a structured template which had been compiled to assure consistency and allow for a comparative analysis between the industries. Key elements included in the analysis comprised of an assessment of: Perfomance and trends; Strengths and weaknesses; Synergies and tensions; Cross-border and international collaboartions; Research and development; and Future development. Findings on the current state of the sectors were then used to devise future scenarios which would provide further support for identifying the development potential of the individual sectors in the sea basin, as well as of the synergies and tensions that might exist between them. Furthermore, the future scenarios developed contribute to outlining possible policy and financial mechanisms that might be able to provide further support to extend the growth potential and to increase the use of synergies. 1.2.4 Limitations to this study During the course of the study it was our foremost intention to provide a robust analysis by building on valid and justifiable data and information. Therefore, we have taken great care to validate and cross check results using different sources of information and including statistics, published literature as well as interviews with relevant stakeholders. 6 European Commission, 2012: Blue Growth opportunities for marine and maritime sustainable growth. COM (2012) 494 final. 7 It is noted that for analytical reasons, shipbuilding was studied separately from deep-sea shipping, and in effect 7 instead of 6 sector studies were conducted. 11

It is our understanding that a follow-up analysis could potentially benefit from further extending the scope of this report and bring in an additional dimension by assessing interconnectivity of activities between the European sea-basins and comparing contrasting the findings of the parallel running sea-basin studies. 1.3 Structure of this report The following chapters of this draft final report present the findings of the study according to the following structure: Chapter 2: Country analysis; Chapter 3: State of play: most promising and relevant sectors in the sea-basin; Chapter 4: Future Scenarios for the most relevant and promising sectors in the sea-basin ; and Chapter 5: Conclusions and recommendations. 12

2 Country Analysis 2.1 Overview The North Sea region is an essential area for European maritime activities. It hosts the largest and most important ports, it provides the busiest shipping routes and houses energy and electricity generation through renewable (wind turbines) and non-renewable sources (offshore oil and gas), while its coastlines are among the most intensively used in Europe. The aim of the country analysis was to identify and analyse in detail the key maritime sectors for each of the countries and to identify patterns of development. In order to identify the largest and the fastest growing sectors a quantitative analysis has been carried out based on the added value of the sectors in terms of GVA and employment. Eurostat statistics were identified as the primary source of data with secondary sources such as industry reports and national associations providing additional information. The data were cross-checked and validated using these multiples sources and trends have been analysed to identify patterns. The most promising sectors were identified using qualitative indicators such as innovativeness, competitiveness, sustainability etc. The region of the North Sea is highly industrialised, and serves as a home to many up- and downstream activities for its main sectors as well as hosting strong educational and research capacities. While overall the region boasts strong economic figures in terms of both GVA and employment, there are some disparities between regions in the less inhabited north versus the high density regions in the southern part of the sea basin. Such disparities can be partially explained by the limited accessibility of regions in the northern part of the sea basin. These regions also strongly depend on traditional industries such as fisheries and agriculture which have pushed out labour and where urban areas have increasingly shifted towards higher skilled jobs in IT, electronics, research and development. Moreover, as pointed out by a recent report, the overall economic performance of the North Sea region has declined during recent years compared to other OECD countries. Despite the long period of economic growth (until the 2008 financial crisis), most of the countries have faced falling productivity rates in the last 10-15 years. The following sections provide a summary of the country profiles, additionally 2-page country reports can be found in Annex II A/D. 2.2 Belgium Overview Belgium counts shipping (both deep and short sea), coastal tourism and construction of water projects among its largest maritime activities. While many of these activities have been long established in the country, there are still ones such as construction of water projects and inland waterway transport with further development potential. This development potential is reflected by the growth of these industries during the past 3 years 8, consequently these two sectors are also accounted amongst the most promising activities. 8 Based on data availability 13

Short-sea shipping was listed as the largest maritime activity and is also listed as the fourth most promising one. This is explained further by the industry figures which show that from all shipping activities in 2008 the share of short-sea shipping was at 53.5% and grew to 57.5% in 2010 9. Table 2.1 Overview of the key maritime economic activities in Belgium 10 Maritime economic activity GVA( million) Employment Other sectors Shipbuilding and ship repair 70 1,270 Construction of water projects 11 460 3,520 Maritime transport Deep-sea shipping 547 3,306 Short-sea shipping (incl. Ro-Ro) 740 4,472 Passenger ferry services 367 2,349 Inland waterway transport 414 3,014 Food, nutrition and health Fisheriesfor human consumption 610 7,600 Marine aquaculture 3.4 80 Energy and sea bed materials Offshore wind 34.8 1,200 Aggregates mining (sand, gravel, etc.) 10 100 Leisure and tourism Coastal tourism 400 8,900 Cruise tourism 131 838 Coastal protection Coastal protection 170 1.680 Sources: Eurostat, JRC, FAO, EWEA Aggregate mining which was identified as the fastest growing sector started in 1976. The primary recipient of sand is the construction sector and the cement industry where it is mixed with other aggregates. Offshore wind was identified as the promising activity, and is centred around Oostende. All in all, it is estimated that 1,200 people are now employed in offshore wind, about 33% of the overall employment in in the wind energy sector. All in all, it is estimated that 1,200 people are now employed in offshore wind, about 33% of the overall employment in in the wind energy sector in Belgium. Regional level activities Belgian coastal NUTS 2 regions are related to three of the Flemish provinces: West Flanders, East Flanders and Antwerp: In terms of GVA, 100% of the oil and gas and 75% of inland waterway transport activities were related to Antwerp 12 ; 9 Ecorys estimation based on Eurostat data 2013 (see methodology annex) 10 Please see the individual country reports for further details 11 In the scope of this study defined as per NACE sector 42.91 of Eurostat, this class includes construction of waterways, harbour and river works, pleasure ports (marinas), locks, etc., of dams and dykes, and dredging of waterways 14

West Flanders activities were concentrated on passenger ferry services, fishing, blue biotechnology, coastal tourism and yachting (all with 100% of GVA); East Flanders maritime activities were more scarce and related to shipping (both deep and short-sea) as well as inland water way transport (25% of GVA). Clusters Four maritime clusters were identified in Belgium, these are Antwerp, Oostende, Zeebrugge and Ghent. Zeebrugge is the only cluster identified as being in the growing stage and focused on shipping exclusively. Antwerp is the largest of the clusters and while it can rely heavily on its strategic location its weakness is the lack of flexibility and strong attachment to established activities such as oil and gas or shipping. These can provide a hindrance in opening up towards new activities and innovative ventures. National strategies and policies In Belgium the Federal State has the general competency for the North Sea policy. It embraces the Blue Economy as a concept, and takes the Limassol Declaration as the overarching framework for its policies. The Master Plan for marine spatial planning system is a regulatory and legally enforceable blueprint that covers Belgium s territorial sea. The original 2005 Master Plan was developed by the Ministry of the North Sea; it has been revised in 2012 under the egis of the Federal Ministry of Environment 2.3 Germany Background Germany has direct access to two sea-basins, namely the North Sea (north-west coastline) and the Baltic Sea (north-east coastline). The entire coastline has a length of 3,204 km, representing 2.35% of the total coastline length of the EU-22 coastal Member States. Approximately 2,200 km (1.6% of the total coastline length of the EU-22 coastal Member States) is allocated to the Baltic Sea and about 1,000 km to Germany s North Sea coastline. Maritime economic activities Regarding maritime economic activities, shipping and fishing are still considered to be the largest sectors in the North Sea region. While deep-sea shipping has been very negatively impacted during the last few years and freight volume declined from over 120 million tonnes in 2008 to 99 million tonnes in 2009 (-20%), a slow recovery process has now been underway. 13 Table 2.2 Overview of the key maritime economic activities in Germany 14 Maritime Economic Activity GVA (, million) Employment Other Sectors Shipbuilding and ship repair 540 10,840 Water projects 80 1,820 Maritime transport 12 Derived from Eurostat figures 13 Derived from data analysis based on Eurostat 14 Please see the individual country reports for further details 15

Maritime Economic Activity GVA (, million) Employment Deep-sea shipping 3,150 19,690 Short-sea shipping (incl. Ro-Ro) 4,020 25,100 Passenger ferry services 40 690 Inland waterway transport 1,200 8,960 Food, nutrition, health and ecosystem services Fish for human consumption 1,540 38,840 Marine aquatic products 3 10 Agriculture on saline soils 1 30 Energy and raw materials Offshore oil and gas 620 2,980 Offshore wind 1,410 15,150 Aggregates mining 20 270 Leisure, working and living Coastal tourism 880 41,760 Yachting and marinas 230 2,380 Cruise tourism 110 1,530 Coastal protection Coastal protection, protection of habitat 110 1,130 Source: Eurostat Offshore wind is one of the most rapidly developing sectors in Germany. Due to Germany s nuclear power phase-out and climate protection targets, the extension of offshore wind energy is a main focus of the Federal Government. In March 2013, a total of 320 Megawatt (MW) were in operation (50 MW in the Baltic Sea), another 1.600 MW under construction and 10.000 MW approved, most in the North Sea. Therefore, the rapid growth of the last years (+68% turnover and +62% employment from 2010 to 2012 annually) is anticipated to continue. 15 It is also important to notice that the long established and traditional shipping industries also feature in the most promising list indicating innovativeness, sustainability and development potential. Regional level activities To define the regional breakdown of maritime activities, NUTS1 level distribution was considered for Germany. Maritime transport is still the most important activity in terms of GVA for the North Sea adjacent states with Hamburg contributing 1.57 billion to the overall 3 billion North Sea side value of the sector. Other key sectors in the North Sea basin of Germany include coastal tourism with 880 million GVA, the majority of which is distributed between Lower Saxony ( 380 million), Schleswig-Holstein ( 230 million) and Hamburg ( 260 million). Hamburg also serves as the centre for the maritime activities for yachting and marinas as well as cruise tourism. 15 Derived from data analysis based on Eurostat 16